Home prices in 20 U.S. cities rose more than forecast in June from a year earlier, reflecting the influence of a government tax incentive and a sign the market was stabilizing before sales plunged in July.
The S&P/Case-Shiller index of property values increased 4.2 percent from June 2009, the group said today in New York. The median estimate of economists surveyed by Bloomberg News called for a 3.5 percent advance.
The Case-Shiller index is a moving three-month average, which means the June data are still being influenced by transactions in April and May that benefitted from the government incentive. A pullback in demand since the credit ended, mounting foreclosures and an unemployment rate near a 26-year high may weigh on prices in coming months.
“The numbers were inflated by the homebuyer tax credit,” said David Sloan, a senior economist at 4Cast Inc. in New York, who accurately forecast the gain. “The numbers will be going down in the coming months. We could see some significant declines.”
Stock-index futures trimmed earlier losses after the report and Treasury securities held gains. The contract on the Standard & Poor’s 500 Index fell 0.1 percent to 1,044.3 at 9:15 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 2.50 percent from 2.53 percent late yesterday.
Economists forecast the index would rise after a 4.6 percent year-over-year increase in May, according to the median of 21 forecasts in a Bloomberg survey. Estimates ranged from 2.5 percent to 4.2 percent. Year-over-year records began in 2001.
The gauge rose 0.3 percent in June from the prior month after adjusting for seasonal variations. Unadjusted prices climbed 1 percent from the prior month.
The year-over-year measure provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Nationally, prices increased 3.6 percent in the second quarter from the same time last year and were up 2.3 percent from the previous three months.
San Francisco, San Diego
Fifteen of the 20 cities in the S&P/Case-Shiller index showed a year-over-year increase, led by a 14 percent gain in San Francisco and an 11 percent increase in San Diego.
Compared with the prior month, 17 of the 20 areas covered showed an increase on an unadjusted basis, led by 2.5 percent gains in Chicago, Detroit and Minneapolis. Two cities were little changed and Las Vegas fell 0.6 percent.
“While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” David Blitzer, chairman of the index committee at S&P, said in a statement. Should the July plunge in sales continue, “it will likely filter through to home prices in coming months.”
Builders such as KB Home and Lennar Corp. reported falling sales after April 30, the deadline for homebuyers to sign contracts to purchase a home to qualify for the extended tax credit. The deadline to close transactions by June 30 was later extended to Sept. 30.
Donald Tomnitz, chief executive officer of D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, said he welcomes the end of federal homebuyer tax credits that boosted sales earlier in the year.
Back to Normal
“I don’t want the tax credit to be re-enacted or be recreated or extended,” Tomnitz said on an Aug. 3 conference call with investors. “We want to get back to a normalized market.”
Purchases of new homes plunged in July to a record low, and the median price was the lowest level since 2003, Commerce Department data showed this month. The National Association of Realtors reported a record 27 percent drop in July sales of existing houses.
With the April 30 deadline for signing a contract now past, it will be up to advances in the labor market to support home sales. Private U.S. companies added 71,000 jobs in July, fewer than economists had forecast, and initial jobless claims have averaged about 488,000 this month, a sign firings remain elevated.
The economy is a top issue for voters in the November congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance. Public approval for the president’s handling of the economy was at 41 percent in an Aug. 11-16 Associated Press-GfK survey, an all-time low and down from 50 percent last July.
Foreclosures may be an obstacle for the market for much of the year. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010, according to RealtyTrac Inc., an Irvine, California-based data company.